Buying a property off-the-plan meaning before it has been built, or while it is under construction can be an exciting opportunity. It offers the chance to secure a brand-new home or investment property at today’s price, often with a premium finish.
However, off-the-plan contracts are fundamentally different from a standard residential conveyance. They involve unique risks, significant waiting periods, and complex statutory protections that every buyer must understand. In Queensland, recent legislative changes, particularly surrounding sunset clauses, have shifted the balance of power, making expert legal advice more critical than ever.
This guide breaks down the essential legal considerations for off-the-plan conveyancing in Queensland.
The Landscape of Off-the-Plan Contracts in QLD
An off-the-plan contract involves the sale of a proposed lot, meaning the land or unit you are buying does not yet have a registered title or a certificate of completion (often called an Occupation Certificate).
The Risks Unique to Off-the-Plan Purchases
While the benefits include potential capital growth during the construction period, the risks can be substantial. These include construction delays, which can tie up your deposit and financial planning for years. The final property may differ from the display suite or plans (e.g., changes to internal layout, fittings, or materials) and there’s usually scant chance of being compensated for it. You also face the risk of developer insolvency, which can stop the project temporarily or permanently, and a valuation shortfall, where the bank valuation at settlement is lower than the contract price, leaving you to cover the difference. These contracts are rarely subject to finance, so your deposit is at stake (and more) if your finance falls through come settlement.
The Critical Role of Your Deposit
The deposit is your commitment to the contract, often set at 10% of the purchase price, but Queensland law allows developers to request a deposit of up to 20% for proposed lots without triggering the onerous rules of an instalment contract.
The deposits for off-the-plan sales should be held in a regulated stakeholder’s trust account (such as a solicitor or agent) until the property is settled or the contract is lawfully terminated. This provides strong protection for the funds in the event the development does not proceed.
⚠️ Note on Deposits and Instalment Contracts If your contract requires you to pay an amount greater than 10% (for registered land) or 20% (for proposed lots under community titles) before obtaining title, your contract may be classified as an instalment contract. This classification triggers a separate set of complex, older statutory protections and rules that takes the matter into more challenging territory.
If you need an off the plan contract reviewed, contact us today to ensure you are legally protected.
Navigating Statutory Protections
Queensland property law provides buyers with specific statutory rights to terminate an off-the-plan contract outside of the general contract terms.
- The 5-Business-Day Cooling-Off Period
The standard residential contract in Queensland includes a 5-business-day cooling-off period. This period starts the day the buyer receives a copy of the contract signed by both parties and allows the buyer to terminate for any reason. If you terminate during this period, the seller is entitled to withhold a penalty of 0.25% of the purchase price from your deposit. Developers may pressure you to waive this right. Never sign an off-the-plan contract without first seeking legal advice, as waiving this period removes your immediate legal safety net.
- The Right to Rescind Due to Material Prejudice
If, after signing, the developer makes changes to the property such as the plan of subdivision, the lot number, or key inclusions and that change would cause you to be materially prejudiced, you may have rights to seek compensation or to terminate the contract. Material prejudice isn’t a defined term in the legislation but the common law surrounding that phrase means a change that results in a significant disadvantage you would not have accepted had you known about it beforehand. We can review the developer’s Disclosure Statement and any subsequent change notices to determine if a right to terminate has been triggered.
The Critical Sunset Clause Reforms
The Sunset Clause sets the final date by which the plan of subdivision must be registered or the building completed. Historically, developers could misuse this clause to unilaterally terminate a contract if property values increased, refund the buyer’s deposit, and re-sell the property at a higher market price. The Queensland Government addressed this misuse by amending the Land Sales Act 1984 (Qld) in November 2023.
Key Changes Under the New Laws
The new laws severely restrict a seller’s ability to terminate an off-the-plan land contract (excluding most strata apartments/townhouses) under a sunset clause. A seller can now only terminate with:
- The Buyer’s Written Consent: The seller must issue a Sunset Clause Notice at least 28 days before the sunset date, outlining their reasons and seeking consent. Critically, the buyer’s failure to respond does not constitute consent.
- An Order of the Supreme Court: If the buyer withholds consent, the developer can apply to the Supreme Court for an order. The Court will grant this order if it is satisfied that the termination is just and equitable. The Court will consider the reason for the delay, whether the seller acted reasonably, and the increase in market value.
Off-the-Plan Due Diligence Checklist
Thorough investigation before you sign is the best way to mitigate risk.
Your lawyer plays a critical role in reviewing the contract for key clauses, including the sunset date, finance conditions, default interest, and material change provisions, ensuring no term contradicts your statutory rights. You should also research the developer’s track record, including past projects, financial stability, and reputation for finishing on time and budget.
It is vital to scrutinise the Disclosure Documents, particularly the Disclosure Plan (proposed lot location, area, and orientation) and the Schedule of Finishes (fittings, fixtures, and materials). For properties in strata schemes, your legal team must examine the proposed Community Management Statement (CMS), Body Corporate By-Laws, and the estimated administrative and sinking fund levies.
Finally, regarding Finance, never rely solely on pre-approval. Your formal loan approval and valuation will only occur just before settlement, which could be years after signing. Ensure you have a clear financial strategy for settlement that accounts for this delay.
Are you a developer needing to check or update your standard contracts to ensure compliance with the Property Law Act 2023, the Land Sales Act 1984 and the latest case law? It is crucial to avoid having parts of those documents set aside or deemed invalid. Contact us today.
Conclusion
Buying off-the-plan can be a rewarding way to secure a new asset, but the length of the contract term combined with the legal and financial uncertainties demands a proactive approach. The new protections introduced in Queensland, particularly around sunset clauses, are designed to protect you, but they are not a substitute for having an experienced property lawyer by your side.
Your legal team will not only review your contract for unfair terms but will also monitor the developer’s obligations and act swiftly if your statutory rights are triggered.
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